Integration competition and environment: Three scenarios for the European electricity market

This paper dears with the issue of liberalisation and competition in the electricity industry of the European Union. It stresses the need of considering jointly the effects of competition on the electricity market and environment. Both the effects are not univocal and positive or negative changes in the social welfare are possible. Many variables interact and influence the final impact of liberalisation so that it falls within the dominion of possibility. Nevertheless, through the environmental policy and an appropriate system of incentives, the public authorities can address forces such as the diffusion of renewables and cogeneration in order to generate positive environmental effects. Three possible solutions are synthesised in three simple, qualitative scenarios.